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I’m trying to decide if buying a house with a homeowner's association (HOA) is worth the headaches. A lot of websites mention that HOAs maintain housing prices better but I couldn’t find any specific numbers. Is there any third party independent research comparing the changes in pricing between HOA and non-HOA neighborhoods?

If it matters, I’m looking at single family houses in the $800k-1m range with HOA fees of $100-200 vs houses without an HOA.

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    The #1 source for the statement that HOAs keep prices up are HOAs themselves, so not too good a source
    – Hobbamok
    Jul 8 at 11:07
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    The potential negative aspect of an HOA massively outweighs any positive aspect. So, if you're a pessimistic person, favour non-HOA. Been there, experienced it, can't talk about optimistic people.
    – Jeffrey
    Jul 8 at 16:19
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    I bought a house w/o an HOA so I could work on cars, play music, do my own yardwork, and more without getting fined every 5 minutes. Other's buy houses for their location, prestige, or 1000 other reasons. If you are going to live there, decide on the merits of the house by what you can stand living in (at minimum), not what market value it'll have in some indeterminant X number of years. You'll always be wrong and unhappy if you do that. Also, a disaster that levels the neighborhood will decrease home values regardless of HOA status, for example. Jul 8 at 17:57
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    Would the HOA terms prevent you from doing things you like or does it prevent your neighbors from doing things you don't like? There is literally only one person here that can determine whether the headaches are worth it for you; you. The only way I can see HOAs increasing home value is through the greater fool theory.
    – MonkeyZeus
    Jul 8 at 18:35
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    @Hobbamok While it is difficult to prove a negative, to the best of my knowledge HOAs and their agents are the only source of the claim that HOAs help improve home value. Jul 9 at 21:04
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There is unlikely to be a long-term difference in price appreciation, for the following reason. Imagine two otherwise comparable houses, one with an HOA and one without. (The same argument applies to any other stable feature, say one with a pool and one without.)

If the houses are currently the same price, and if house A appreciates say 2% per year more than house B, then in 35 years house A will be twice the price of house B. These numbers are just an example -- the point is that any sustained difference in appreciation will lead to an increasing price gap over time.

If the basic nature of the houses and the HOA is not changing, then while it's understandable that the market might put a premium on house A or B, there's no reason for the premium to steadily increase without bound. The houses are competing in the same market. In 35 years, the houses will still be physically similar, and whatever difference the HOA makes to the resident experience will be similar, so it doesn't make sense that one would be worth double the price of the other (or in another 35 years, quadruple, etc.).

Significant changes in the (perceived) attributes of HOAs would lead to differences in appreciation while the changes are occurring, but then appreciation would equalize unless there are further changes.

This specifically refers to price appreciation. Note that price appreciation is only one component of investment return, which in turn is only one component of the rewards (economic and personal/psychological) of home ownership.

Each prospective home buyer will weigh their own percieved costs and benefits of an HOA. Some may be willing to pay more for an HOA, some less, and the supply-demand balance will determine market prices. HOA fees and any differences in "quality of life" will affect the comparison to "equivalent rent" and thus affect the level of house prices. However, the relative differences are likely to fluctuate in some stable range rather than in a secular exponential trend.

If you can buy with or without an HOA at the same price and be equally happy living there, then you can save the HOA fee and so your total return (including appreciation, equivalent rent, and ongoing costs) on the non-HOA house will be higher. If everyone felt that way, then the price of the HOA house would be lower (since the HOA fee partly offsets the equivalent rent), so as to make the total return on both houses the same. In both cases, the expected percent appreciation is equal for the two houses.

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  • The question is asking for answers based on research, but no studies are cited here. Research indicates that HOAs are correlated with significantly lower APY when controlling for various factors. Also, a HOA and non-HOA house are not necessarily competing in identical markets. If there are a sufficient number of people who very much want or don't want an HOA, then the market for (i.e. the people who would buy) each house are different.
    – jvriesem
    Jul 12 at 16:54
  • @jvriesem sadly doesn't seem like there's any serious research into this? Jul 12 at 19:06
  • @jvriesem I believe I'm making a sound theoretical argument. I'm not saying that HOA and non-HOA markets are identical, but that the "people who very much want or don't want an HOA" should result in stable relative prices in the long run. Your answer mentions that observed historical appreciation may have been lower with HOAs because of their "increasing negative stigma". That is also what I mention as "changes in the (perceived) attributes of HOAs". But can the stigma really keep getting worse and worse, such that eventually an HOA house is worth 1/2 as much, then 1/4 as much, etc.?
    – nanoman
    Jul 13 at 7:14
  • @jvriesem This is somewhat analogous to how some of the strong returns of the stock market in the 20th century came from "multiple expansion" (increasing P/E), as the masses became comfortable investing in stocks. This was a one-time boost and can't be expected to continue. Otherwise -- if we took this as part of the expected ongoing future return -- we'd be saying that the P/E would eventually reach 1000, etc.
    – nanoman
    Jul 13 at 7:21
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I doubt there is good data on the topic because HOA's vary wildly in terms of what services they provide and what restrictions they impose on homeowners. Regardless of what happens on average, you need to evaluate on a neighborhood by neighborhood basis. The notion that HOA's can help property values is often attributed to the idea that they can force a minimum level of upkeep, but many cities have rules that are intended to do the same. The effectiveness of such rules also varies wildly.

Focus on the area you're interested in living, then find out if there's an HOA and what it does/doesn't do. Some HOA's are very hands off and only exist to fund upkeep of some common areas, some seem to control most everything. If you're looking at an area where the HOA has substantial financial responsibilities (like a condo/townhouse complex where they replace roofs/paint exteriors, etc) then make sure when you review the HOA finances that they have healthy cash reserves. It's also worth talking to potential neighbors to find out about the HOA. If buying in a new city/county, make sure to read up on their codes/ordinances.

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    Unfortunately the “hands off HOAs” are not guaranteed to not introduce some bylaws at the very next owners meeting. The ones I’ve looked into around me never require a 100% vote to introduce a new rule, so you won’t have a veto against new restrictions if you buy a house there. But that’s just in Washington - perhaps other states have “hands off” HOAs with a hard veto on any changes. Jul 8 at 3:13
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    There are also some horrific HOAs that drive prices down heavily due to being nitpicky tyrannical overlords. Or as @JonathanReez states almost any HOA has the potential to become such monster
    – Hobbamok
    Jul 8 at 11:07
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    @JonathanReez "Unfortunately the “hands off HOAs” are not guaranteed to not introduce some bylaws at the very next owners meeting." Nothing about real estate investment is a guarantee. Even barring HOAs, you have no guarantee that something else isn't going to massively impact house prices.
    – Flater
    Jul 8 at 11:20
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    @JonathanReez That depends on how the HOA was set up, many have a defined scope that prevents them from going off the rails. Everyone has their own idea of where the line between reasonable and oppressive is, just do your research up front to avoid surprises.
    – Hart CO
    Jul 8 at 13:56
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    @JonathanReez Re: changing the bylaws - Know that in most places, a lot of people don't care enough to participate in HOA activities at all. Our HOA only requires a 75% vote to change the bylaws, but we're doing good if we can get the 33% attendance required to have a quorum to hold a meeting. Those that do show up tend to be those that are there to oppose or complain about something, so the reality is that it's usually much harder to change the bylaws than it might appear (especially in large communities).
    – bta
    Jul 8 at 20:52
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What is the purpose of you buying this home?

If price appreciation is the only goal then the key is to make money on the buy. What home in your area is currently undervalued that will be higher valued later? HOA or non-HOA has nothing to do with that question.

If the purpose is to buy a home, and rent rooms to supplement your income then you need either a weak or no HOA. Most HOA's have rules against such, they want a single family living in a single family home.

If the purpose is to live in the home, then you should do what makes you happy. Two friends recently sold their homes to move to a different setting. They both used to be in a strongish HOAs with similarly sized homes and properties. One couple moved to a lake front property with no HOA and a large yard. The other couple moved to a townhome with an even stronger HOA. Both were very happy with their purchase.

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    The purpose is to live there and enjoy the property (which might include painting it pink by myself just for fun) but I also want to understand how much money I’m missing out on 20 years down the line by not having an HOA. Jul 8 at 16:42
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    @JonathanReez it is impossible to know what the best deal will be 20 years in the future, impossible. Just buy a home that makes you happy.
    – Pete B.
    Jul 8 at 17:01
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    The assertion "HOA or non-HOA has nothing to do with that question" appears to be the crux of the question-as-asked. Do you have data to back up this assertion? Jul 8 at 19:32
  • @PeteB. -- you're making a presumption about home investment that isn't even close to true (i.e. you're presuming the OP wouldn't ever be interested in renting the entire house out, which is not generally true -- I'd reckon whole-house rentals of SFDs are more common than renting individual rooms in a house, especially in areas where there isn't a lot of college presence to create demand for roommates) Jul 10 at 0:05
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It's difficult to find that sort of comparison data because neighborhoods generally have more differences than just the presence or absence of an HOA.

For example, I live in an HOA neighborhood. I'm a couple of miles outside city limits in an "unincorporated" part of the county, and the HOA exists to replace the city services that we don't have access to. They pave the roads, keep the streetlights working, manage the water infrastructure, etc. The deed restrictions implement things that would be covered by zoning laws in city limits. Our property values are slightly lower, but is that because of the HOA? Or is it because we're farther away from downtown? Or because we're serviced by a volunteer fire department instead of the city fire department? Too many variables changed, so it's hard to come up with real numbers.

My parents also live in an HOA. They live in city limits, so their HOA only exists to manage the neighborhood swimming pool and maintain the landscaping in the roadway medians. Their property values are higher than the next neighborhood over, but is that because they have an HOA, or because they have a well-maintained community pool?

Take a good hard look at why the HOA exists for your neighborhood in question. The HOA management will generally give you a copy of their requirements and deed restrictions if you let them know you're a prospective buyer. If it's nothing but rules for homeowners and the HOA isn't managing common assets, then it's probably more hassle than its worth. If the HOA is managing community assets/amenities, then those amenities will likely impact the property value more than the presence of the HOA.

I've also found it helpful to ask your potential neighbors about what they think of the HOA. Many neighborhoods also have Facebook groups that are open to join, and there's a lot of information to be gleaned from there (but don't forget that internet comments are highly biased towards complaints). If you've got too much free time, you can pull the HOA's records (required to be public in some locales) and see how much they typically bring in each year in fines. Those records will also show you what they're spending their money on, which is a good indication of where their priorities lie.

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    For me the rule of thumb is "can I paint my house pink on a whim?". If the answer is no, the HOA is too restrictive. Sadly there are very few HOAs that only maintain common property without having any rules whatsoever besides "pay money for upkeep". Jul 8 at 20:51
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    @JonathanReez That's not always a good rule of thumb because comparable non-HOA neighborhoods can have similar rules thanks to city ordinances. It's actually less bad if it's just an HOA rule, because getting elected to your HOA board and changing or ignoring dumb rules is a lot easier than changing local law.
    – bta
    Jul 8 at 20:55
  • The cities where I'm looking to buy don't have such an ordinance (as far as I can tell) so its all good. Plus dealing with local government is generally less frustrating than dealing with HOA busybodies. Jul 8 at 20:59
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Research

HOAs might in some situations increase property value, but research suggests properties without HOAs increase in value more.

Here's an article that summarizes one such study. Here are some highlights:

  • HOAs tend to have lower returns than non-HOA properties, regardless of fees.
  • HOAs with fees are expected to increase property values slower than HOAs without fees.
  • Likely reasons for this include:
    • Home buyers value freedom over HOAs.
    • Some home buyers avoid HOA fees.
    • HOAs have an increasing negative stigma due to disputes.

In short, housing developers created HOAs and told people that such agreements would increase property values by making things uniform. (If I had to guess, I'd say this was enhanced by the 1950s emphasis on uniformity and superficial appearance in the USA.) I'm guessing people bought into it enough to make prices rise temporarily due to demand. At any rate, these promises by developers increased demand and caused more HOAs to spring up.

HOAs work great if there's a whole neighborhood of people that share common values they want to collectively impose on each other. They also work great for certain situations like paying for maintenance for a shared private road. But society is changing, public awareness is increasing about HOA disputes, and demand is dropping.

My Advice

Despite the relatively lower gains in property value, HOAs can provide useful services to the community, like maintenance. If you want to be able to police your neighbors (sometimes the police don't want to get involved, e.g. for loud music late at night), perhaps that's worthwhile to you. However, they also can impose restrictions on your freedom as a homeowner.

Weighing the value of an HOA is up to YOU. If you find a place you like, read the HOA agreement carefully, line-by-line. Know that some HOA dues may increase. Figure out whether the terms of the HOA are flexible (e.g. by vote) or set in stone. If the terms can be changed by popular vote, try to figure out if the people in that neighborhood share your values.

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The average cost is more than $300 per month

Source

Cool, so a $100k mortgage for 30 years at 4% is $477/month. $777/month with HOA.

For $300 more per month why not just get into a nicer house to begin with?!?!

A $160k mortgage would be $764/month.

I am willing to bet that the $160k house is going to be worth more than the $100k HOA house by the time you decide to sell it.

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    @JonathanReez Maybe add that detail into your question because it does make the math significantly different =)
    – MonkeyZeus
    Jul 8 at 18:04
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    This approach makes no sense as it just ignores the value provided by the HOA. I have some units in the ~$300/month HOA range, these HOA's cover exterior maintenance (roof, paint, siding, external light fixtures), snow removal, landscaping, the water bill. Some have pools/rec rooms that get covered by the HOA. It's not just wasted overhead.
    – Hart CO
    Jul 8 at 21:55
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    @HartCO - is that for a home owners association or a condo? No HOA in my city covers the maintenance of the houses.
    – Jon Custer
    Jul 9 at 13:27
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    The dwelling type doesn't matter, the point is you have to factor in what the HOA fee gets you, people aren't paying $300/month just for enforcement of some rules, that'd be absurd. Condos, townhouses, paired homes, patio homes, etc are more likely to have higher HOA fees that cover more of the exterior items since that's the draw of those home types, but again, it doesn't matter, whatever the HOA fee/dwelling type, factor in the value of what it provides. If it covers a community pool and you don't care for swimming, then you can do your calculation to buy more home, but don't ignore it.
    – Hart CO
    Jul 9 at 15:14
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    It's just not a good money answer as-is imo because you ignore the value of what the HOA provides. In most cases, some portion of the HOA cost would still come to you if there were no HOA (especially when talking a $300/month HOA fee), so it's not as simple as HOA vs more mortgage. You could fix it by instead comparing the difference between HOA cost and value of HOA benefits to more mortgage.
    – Hart CO
    Jul 9 at 16:05

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